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Technological Progress, Terms of Trade, and Monopolistic Competition

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  • Chul Chung

Abstract

This paper examines welfare implications of technological progress in the new trade model with monopolistic competition. Our result shows that labor-augmenting technological progress turns the terms of trade against the growing country while capital-augmenting technological progress shifts them in favor of the growing country. Unlike the Findlay-Grubert theorem, both technological progresses are welfare-enhancing. The key channel for this welfare effect is the love of variety in the new trade model.

Suggested Citation

  • Chul Chung, 2007. "Technological Progress, Terms of Trade, and Monopolistic Competition," International Economic Journal, Taylor & Francis Journals, vol. 21(1), pages 61-70.
    • Handle: RePEc:taf:intecj:v:21:y:2007:i:1:p:61-70
    DOI: 10.1080/10168730601180887
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    References listed on IDEAS

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    4. Alan V. Deardorff, 2011. "Fragmentation in simple trade models," World Scientific Book Chapters, in: Robert M Stern (ed.), Comparative Advantage, Growth, And The Gains From Trade And Globalization A Festschrift in Honor of Alan V Deardorff, chapter 16, pages 165-181, World Scientific Publishing Co. Pte. Ltd..
    5. Flam, Harry & Helpman, Elhanan, 1987. "Industrial policy under monopolistic competition," Journal of International Economics, Elsevier, vol. 22(1-2), pages 79-102, February.
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    Cited by:

    1. Wen-Xi Ruan & Xin Yu & Sheng-Yuan Wang & Tian-Cheng Zhao & Ya-Zhen Liu, 2022. "Exploration of China–ASEAN Trade Relations in the Context of Sustainable Economic Development—Based on the Lotka–Volterra Model," Sustainability, MDPI, vol. 15(1), pages 1-22, December.
    2. Kwok Tong Soo, 2016. "Intra-industry trade: A Krugman–Ricardo Model and Data," Economica, London School of Economics and Political Science, vol. 83(330), pages 338-355, April.
    3. Bernhard G. Gunter & Valeria Vargas Sejas, 2017. "Free Falling Terms of Trade Despite Industrialization: The Case of Bangladesh," Bangladesh Development Research Working Paper Series (BDRWPS) BDRWPS No. 33, Bangladesh Development Research Center (BDRC).
    4. Kwok Tong Soo, 2013. "Intra-industry trade," Working Papers 33867578, Lancaster University Management School, Economics Department.
    5. Kwok Tong Soo, 2018. "Multinationals do not export jobs, and other related results," Working Papers 244952396, Lancaster University Management School, Economics Department.

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